December 10, 2010

Battle Over Sunken Treasure Lands in D.C.’s Federal Court

A Manassas, Va.-based solo practitioner is representing an underwater salvage company in a $17 billion federal lawsuit against the Republic of Colombia, alleging that the South American nation has illegally blocked its efforts to recover 300-year-old sunken treasure. The suit in Washington stems from a decades-long legal battle over the treasure that has already reached the Supreme Court of Colombia.

Sea Search Armada argues in its Dec. 7 complaint, filed in the U.S. District Court for the District of Colombia, that the Colombian government conspired against the company to come up with legal theories designed to back out of an agreement that allowed Sea Search to explore and recover coins and bullion from the Spanish galleon San Jose. The San Jose was sunk by the British Navy on June 8, 1708 during a naval battle off the coast of Colombia.

The 43-page complaint, filed by James DelSardo, who operates Argus Legal, reads like a buried-treasure novel.

Sea Search contends that in 1980, the Glora Morra Co. was granted permission to explore the Colombian Continental Shelf for shipwrecks by the Colombian agency that oversaw underwater explorations at the time. After locating the sites of what it believed were six separate shipwrecks, one of which is purported to be the San Jose, Glora Morra and Colombia began negotiating the terms of a contract that would divvy up the proceeds from any recovered artifacts or treasure. According to Glora Morra’s estimates, the treasure is likely worth between $4 billion and $17 billion today.

The parties eventually agreed that Glora Morra would receive 35% of the recovered treasures with Colombia receiving the rest, although Sea Search says it is actually entitled to 50% of the recovery.

The complaint alleges that after Glora Morra transferred its stake to Sea Search, an investment partnership set up to search for the remains of the San Jose, the Colombian government delayed signing the agreement in order to have more time to develop a legal theory that would reduce Sea Search’s share to 5%.

According to the complaint, in 1982 and 1983 Lilliam Suarez, legal secretary to then-Colombian President Belisario Betancur, ordered two research efforts into whether the agreement could be tweaked to reduce Sea Search’s stake.

The complaint says that despite the fact that both research efforts found that the agreement couldn’t be changed in the Colombian government’s favor, Suarez held secret meetings with Swedish investors to discuss how to wrest Sea Search’s stake from the company’s control.

“Subsequent actions by Suarez and her conspirators indicate she was fully aware, having read and discussed the [Government of Colombia’s] several and consistent legal opinions, that her objective of taking 90% of [Sea Search’s] share (reducing it from 50% to 5%) was illegal,” DelSordo writes in the complaint. “The records show that her next steps were to devise legal trappings and sophistry that would serve as a fig leaf to cover the [Government of Colombia’s] theft.”

In 1984, the Colombian Parliament enacted a law that gave Colombia control of all treasure from shipwrecks discovered off the country’s shore. The so-called "Seizure Law" would have given Colombia all rights to the San Jose treasure, except for a 5% finder's fee subject to 45% tax.

Sea Search filed suit in Colombia, calling the Seizure Law retroactive and unconstitutional. The Colombian Supreme Court agreed in 1994, giving Sea Search rights to 50% of the San Jose treasure, and the other half to Colombia, the complaint says.

Despite that judgment, Sea Search contends that Colombia still refuses to let it salvage the shipwreck. The complaint says the country has acted in bad faith for decades to prevent the company from recovering treasure from the San Jose.

Sea Search alleges breach of contract and conversion and says it is entitled to between $4 billion and $17 billion in damages. The complaint asks Judge Ricardo Urbina to issue an order that would enforce the judgment of a foreign court. Sea Search is also seeking to recover attorney’s fees.